Deciding Between Debt Negotiation And Debt Settlement

Because these two terms are often are often used to describe the process of debt relief, many people assume they are the same thing. Debt settlement and debt negotiation are actually very different. Deciding which one is right for you is mostly a matter of your ability to earn income.

Debt negotiation

If you are still pulling in a check on a regular basis, but find yourself swamped with credit card bills, debt negotiation is for you.

Debt negotiation is kind of like a loan modification for your credit card bills. Essentially, with a credit professional like an accountant, you negotiate with creditors to reduce your monthly payments. In reducing those payments, you free up precious cash reserves that will help you pay for basics like utilities and groceries.

Debt negotiation can also save your imperiled credit score. A few missed payments can quickly eat away at your pristine credit rating. Renegotiating the how and what you pay each month can save you from missed payments.

Debt Settlement

Debt settlement is a superior option for individuals strapped for cash because of unemployment or dramatically reduced earning ability. Debt settlement calls for a reduced, one-time, lump sum payment on your outstanding debt. For instance, you pay $5,000 on the original $10,000 of the loan.

Those seeking debt settlement are often starting from scratch, and will need to follow through with debt negotiation counselor to truly get out of debt. A debt negotiation counselor will negotiate with your lenders and help you set up a trust in which you will put money towards a lump sum payment.

It is important to realize that debt settlement is not a good option for people having a difficult time making ends meet, but reserved for those who are in dire financial straits.

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